PepsiCo has today cut its annual profit forecast and warned of higher production costs and volatility from a global trade war sparked by President Donald Trump’s expansive tariffs.
Its shares were down nearly 1% in premarket trading after the Frito-Lay maker also posted its first quarterly profit miss in at least five years.
“As we look ahead, we expect more volatility and uncertainty, particularly related to global trade developments, which we expect will increase our supply chain costs,” CEO Ramon Laguarta said in a statement.
PepsiCo forecast fiscal 2025 core earnings per share to decline 3%, compared with its previous expectation of a low-single-digit increase. The company reported earnings per share of $8.16 last year.
The company plans mitigation actions to address the higher supply chain costs where possible, said Laguarta, adding it would include adjusting sourcing of key inputs.
PepsiCo has two food plants in Mexico and two concentrate plants in Ireland. The 25% US tariffs on steel and aluminum, which came into force in March, could also weigh on the company’s margins.
Laguarta today also called out uncertain and subdued consumer conditions in many markets.
Consumer goods bellwether Procter & Gamble and rival Kimberly-Clark have lowered their profit forecasts due to the uncertainty fueled by the ongoing trade war.
Organic volumes declined 2% in the first quarter, PepsiCo said, as promotions on snacks and sodas take longer to boost demand.
Average prices jumped 3% in the three months ended March 22.
“Price hikes are doing the heavy lifting, with volume growth across its beloved brands like Pepsi, Gatorade, Lay’s and Doritos struggling to gain momentum,” said Aarin Chiekrie, equity analyst with Hargreaves Lansdown.
Price increases undertaken to offset rising costs initially tied to the Covid-19 pandemic and supply-chain disruptions have benefited PepsiCo and peers over the past several quarters.
“With little sign of a positive catalyst in the near term, it could be a tough year for PepsiCo investors,” said Chiekrie.
On an adjusted basis, PepsiCo earned $1.48 per share in the first quarter, missing estimates of $1.49, according to data compiled by LSEG.
The drinks and snacks giant’s revenue fell 1.8% to $17.92 billion. Analysts on average had estimated $17.77 billion.
Meanwhile, PepsiCo and rival Coca-Cola are boosting healthier snacking and energy drinks options to counter slowing demand for their traditional fizzy drinks products.
